The Real Problem With The Economy Is That It Doesn't Need You Anymore

Roughly speaking the world's
economy has always worked as a giant pass-along-game between the
planet’s citizens. Person A needed stuff from person B and person
B needed stuff from person C and person C needed stuff from
person A. So everyone needed everybody. It has been a kind of
giant circle of needs.

But as a smaller and smaller number of people are needed to make
the basic things that people need for survival, from food to
energy, to clothing and housing, the less likely it is that some
people will be needed at all.

When you read in the press the oft-quoted concept that “those
jobs aren’t coming back” this “reduction of need” is what
underlies all of it. Technology has reduced the need for labor.
And the labor that *is* needed can’t be done in more developed
nations because there are people elsewhere who will happily
provide that labor less expensively.

In the long term, technology is almost certainly the solution to
the problem. When we create devices that individuals will be able
to own that will be able to produce everything that we need, the
solution will be at hand. This is *not* science fiction. We are
starting to see that happen with energy with things like rooftop
solar panels and less expensive wind turbines. We are nowhere
near where we need to be, but it is obvious that eventually
everyone will be able to produce his or her own energy.

The same will be true for clothing, where personal devices will
be able to make our clothing in our homes on demand. Food will be
commoditized in a similar way, making it possible to have the
basic necessities of life with a few low cost source
materials.

The problem is that we are in this awful in-between phase of our
planets productivity curve. Technology has vastly reduced the
number of workers and resources that are required to make what
the planet needs. This means that a small number of people, the
people in control of the creation of goods, get the benefit of
the increased productivity. When we get to the end of this curve
and everyone can, in essence, be their own manufacturer, things
will be good again. But until we can ride this curve to its
natural stopping point, there will be much suffering, as the jobs
that technology kills are not replaced.

The political implications of this are staggering. Clearly, more
and more jobs will move from more developed nations to countries
like China, and it is difficult to see how, as this process
continues, the United States retains its leadership position. In
fact, it seems entirely possible that the U.S. will exchange
places with less well-developed nations. Yes, there will
certainly be fabulously wealthy people in the US, because many US
companies will own these highly productive businesses.
Unfortunately, that wealth will be held by a very small number of
people. And their operations will need to employ very few
people.

In short you will have a few very wealthy folks, and a much
larger majority that will just not be needed for the most
important things that the country needs to do.

I don’t know what the short-term solution to this problem is. In
fact, I fear there may not be one. But it is clear that what I am
describing has already started and there is little we can do to
stop it. GDP will increase as demand for labor **decreases**! How
is that for the ultimate economist's oxymoron?